Spatio-temporal dynamics in municipal rates of business start-ups in Chile

While there is a growing body of studies on persistence and change in municipal start-up rates in more developed countries, this type of study for developing countries is still scarce. This work analyzes the spatio-temporal dynamics of municipal business start-up rates in Chile between 2005 and 2015 using spatial panel data for 342 Chilean municipalities from the Internal Revenue Service (SII) database and the National Municipal Information System (SINIM). We employ descriptive statistics, spatial analysis, Markov chains and econometric models to identify persistence and change in the start-ups rates and identify the determinants of the spatio-temporal dynamics in entrepreneurship rates. Results confirm a high level of persistence in the most and least entrepreneurial areas of the county but, at the same time, show mobility in the intermediate municipalities. Econometric models confirm that past rates of entrepreneurship can explain current business start-up rates, and also validate the influence of spatially sticky characteristics, in many cases related to extreme differences in economic development among Chilean municipalities. Increasing diversity and urbanization favour persistence and change, while density, poverty, mining activity and the percentage of large firms and mining have a negative impact. The results suggest place-based policies according to entrepreneurial dynamism.